The US fining a French bank $9 billion may be one of the greater own goals in regulatory enforcement history.

Clearly BNP Paribas behaved badly. Clearly BNP Paribas behaved
badly even according to the somewhat loose grasp on morality held
by many bankers. By the time BNP Paribas endeavored to turn over
a new leaf and informed US authorities that it had been breaking
sanctions by trading with the likes of US pariah nations such as
Cuba, Iran and Sudan, American authorities spat the dummy of full
regulatory force.

US regulators demanded sackings, suspension (from the US dollar
banking system) and that rather significant fine which puts
double parking penalties in stark perspective.

The French government and the National Front have promptly called
foul, convinced that those crazed neo-liberals of the United
States have picked upon a Gallic icon and indirectly are waging
war on the people of France. True, it does seem remarkable that
in the same week that BNP Paribas was fined, so too the New York
attorney general has decided that of all the dubious procedures
on Wall Street, he has prioritized action against a platform
operated by Barclays, a British bank.

In some European circles, a modicum of paranoia reigns, not
helped by US spying allegations. There is a ring of truth that
some European banks appear to have fallen foul of US sanctions
laws despite adhering to the laws of their own countries. Given
that much of the money which went to Sudan appears to have helped
fund a regime of rape and pillage in Darfur, it is clear that BNP
Paribas at least needs considerable work on its corporate social
responsibility policy.

Had the money not been transferred through the US dollar payment
system, US justice would not have had any jurisdiction. Moreover
many feel the US justice system behaves like a kangaroo court
against foreign firms. Had BNP Paribas not settled directly with
government officials, a court case could have led to the French
bank losing its US license, tantamount to a death sentence for an
international financial institution. That a bank which
transferred money to abet rape, pillage and murder can look like
a victim does suggest the US regulatory system appears somewhat
flawed.

However, there is a much larger loser in this whole situation.
Eagerness to pursue any wrongdoing which touches the US dollar
payment system is causing vast numbers of banks, in the USA and
elsewhere to reconsider what was once a core of banking: money
transfer. This is a potentially huge issue. Yes, transferring
money across borders can indeed help fuel money laundering or the
drugs trade and a catalogue of illegal activity. However, for
every drug baron laundering money, millions of migrant workers
transfer money to support families and relatives. Many recipients
of these hard earned dollars are in the emerging world. Therein
lies a problem as increasingly bank regulators view the rest of
the world as too dangerous to service. Over $50 billion in annual
remittances from the USA to Mexico alone are endangered. That’s a
potential catastrophe for Mexican families and millions of others
throughout the world could be affected by a dollar remittances
shutdown.

Given that in any case bank payments, including the US-centric
dollar system are pretty expensive (thanks to dated technology),
it is perhaps unsurprising that many financial innovators are now
focusing on finding ways around existing payments systems. Some,
like Bitpesa use bitcoin technology, although given the cost of
US regulation, this isn’t yet available in the US. Across the
internet there are multiple possibilities using micropayments
which offer cheaper alternatives to established dollar routing.

Many nations, increasingly concerned by US regulatory over-reach
in the financial system and beyond are investigating alternative
payment systems outside American jurisdiction. Nevertheless the
US remains the dominant global currency: over 60 percent of
central bank reserves are held in dollars, while some 87 percent
of foreign exchange transactions involve the greenback.

Despite this dominance, heavy-handed regulation may yet drive the
creation of alternative payment systems. Moscow has been
considering such a move since a cack-handed attempt by President
Obama to stop usage of MasterCard and Visa.

An alternative system for payment using the euro would be a
logical step if it weren’t for the deeply flawed construction of
Europe’s delusional monetary union. Nevertheless, the US cannot
afford to rest on its laurels lest the move to free floating
rubles or yuan help fuel an alternative trade currency, and
nobody can afford to discount bitcoin either.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.